The African Development Bank (ADB) on Thursday predicted a stable economy by end of the year following improved macroeconomic performance the country has registered so far.

ADB Country Rep, Andrew Mwaba, made the observation on Wednesday in Lilongwe where the Bank signed a MK2.1 billion Grant for additional 2012/2013 budget support and another MK1.06 billion Grant for Kholombidzo Hydroelectric Power Plant feasibility study in Mwanza district.

Mwaba said the signing of the grants followed the Bank’s satisfaction with Government’s macroeconomic policy direction.

“The Bank is encouraged by the renewed commitment shown by the Malawi Government, and it’s determination in undertaking bold macroeconomic reforms,” said Mwaba. “We are witnessing preliminary signs towards the firming of the exchange rate and decelerating inflation.

Lipenga: Government will strengthen transparency

“We are confident that the economy will register positive gains by year end.”

He noted that the commitment had been demonstrated by government’s Extended Credit Facility program with the IMF being on track.

The ADB Country Rep, however, observed that while the reforms had yielded some positive gains as evidenced by fuel and foreign exchange availability on the market, the Bank was aware of the hardships, such as inflation, faced by most Malawians.

Finance Minister, Dr. Ken Lipenga, who signed the Grants on behalf of Malawi Government, said it was very delightful to note that there were positive signals towards economic reforms put in place by the current administration.

Lipenga said the recovery process was slow because Government was concentrating on taming the inflation while incurring social spending at the same time.

“If we were to concentrate on combating inflation alone, the economy would be back on its feet in 6 months,” said Lipenga. “But because we are also concentrating on social spending, that is why it is taking longer but we will get there all the same sooner than expected.”

The Finance Minister said the additional budget support Grant would help government strengthen transparency while through the Kholombidzo Power Plant Grant government would produce sound power plant project for funding.

Said Lipenga, “Specifically, with the additional budget support, Government will strengthen transparency and accountability in public finance management systems, restore fiscal stability and enhance social protection for the poor and the vulnerable.”

Of the US$45 million that President Dr. Joyce Banda asked the Bank’s President McDonald Kaberuka to commit to the country’s 2012/2013 Budget Support, the Bank released US$39 million last year.

Thus, with the MK3.1billion (US$6 million) Grant signed on Thursday the Bank has cleared all the US$45 million budget support which government asked for to help reviving the economy.

This, according to Dr. Lipenga, is the largest disbursement of funds made by the African Development Bank in one fiscal year since joining the Common Approach to Budget Support (CABS) Group in 2007.